Tuesday, January 29, 2013

Overstock.com CEO Patrick Byrne Sleeps With a Gun

In numerous blog posts in the past, and in widespread media coverage, evidence has accumulated for years that Overstock.com CEO (NASDAQ: OSTK) Patrick Byrne has shown signs of being mentally unbalanced and paranoid.

Byrne has blamed his company's financial woes on an unnamed "Sith Lord." He hired paid goons to stalk his real and imagined adversaries and to write lengthy conspiracy theories on the Internet. Byrne has close ties with Bo Gritz. The Anti-Defamation League lists Bo Gritz as a far-right extremist with “extensive connections to both white supremacists and anti-government groups and leaders.”

Patrick Byrne
Patrick Byrne's infamous temper tantrums when he doesn’t get want he wants are well documented too. He made obscene and misogynistic comments to a female reporter. He suggested that she gave “blowjobs” to Goldman Sachs traders. He suggested that a male reporter “Sucks It Likes He’s Paying the Rent.” An independent research analyst was told that “You deserve to be whipped, f--cked and driven from the land.” He almost had a fistfight with a lobbyist after Utah legislators repealed his pet bill.

But the severity of Patrick Byrne's issues has only just become evident. He appears to have crossed the red line that separates paranoia from being a figure of speech to a description of actual mental illness.

According to a stunning revelation, buried in a police report that was filed in conjunction with Byrne's recent arrest for trying to carry a concealed weapon on an airplane, Byrne sleeps every night with a semiautomatic Glock 23 .40-caliber pistol by the side of his bed, loaded and ready to kill with lethal hollow-point bullets. [Read copy of police report.]

I am not making this up. Below are the details, which are a matter of public record:

Byrne provides conflicting details to police

Last week, this blog reported that Overstock.com CEO Patrick Byrne was arrested after Transportation Security Administration (TSA) officers found a loaded semi-automatic pistol concealed in his carry-on bag at an airport security checkpoint. The gun was loaded with twelve rounds of ammo. Byrne was handcuffed, according to the newly released police report, and spent several hours in Salt Lake County jail before being released on bail. The incident was so serious that the FBI was notified, though it declined to take action, according to the police report.

At first, the police said that that Byrne told them “he did not know of a gun in his luggage and had no idea where it would be.” The Salt Lake Police Department report provided details of Byrne’s arrest:

DETAILS:
I responded to Terminal Two screening, lane two on a report of a firearm located in a passengers carry on luggage. TSA officer, Randy Glenn, discovered what appeared to be a firearm in carry on luggage in the lane two baggage x-ray machine. I went over and viewed the X-Ray screen and could make out the clear shape of a firearm with bullets in the magazine. I obtained the bag from the baggage belt and took it over to the passenger, BYRNE, Patrick, and asked him if he knew of a firearm he would be carrying. He stated he did not know of a gun in his luggage and had no idea where it would be. I opened the outer pocket on the luggage and noticed the firearm sitting on top of an Apple Ipad inside. I retrieved the weapon from the bag and cleared it of any possible rounds in the chamber. The chamber was empty and the magazine contained twelve rounds of .40 caliber hollow point bullets. Mr. BYRNE was arrested and transported to the station for further investigation. [Emphasis added.]

Afterwards, when interviewed on tape by police, Byrne admitted to packing his own bag, but said that he “may have slipped” the gun into a carry-on bag that was not used for over a year. Byrne's explanation left open the excuse that someone might have planted the gun in a bag he had not used for over a year:

"Yes, I packed my own bag."
When asked if he put the gun in his bag, "I may have slipped it in there."
"I keep the gun next to my bed every night"
"I haven't used that bag in over a year."
[Emphasis added.]

Obviously Byrne did not think the Salt Lake police would buy that story. Finally, Byrne claimed in a signed voluntary Miranda Statement claiming only that:

It was an accident. It did not know it was in the outer pocket of my bag.

This time, he omitted reference to a bag which he previously claimed was not used in over a year.

Byrne’s slippery behavior in police custody is less troubling than his admission, freely given to the police, that he sleeps with a loaded gun by his side.

Byrne’s previous indications of paranoia

In the past, it had been commonplace to refer to Patrick Byrne as being “paranoid,” in the colloquial sense of being unduly suspicious. But a person who keeps a loaded Glock by the side of his bed at night is either: (A) In real danger, or (B) Paranoid in the clinical sense. Byrne obviously meets the second criteria.

For example, on August 11, 2005, Patrick Byrne went into a long rambling rant about a vast criminal conspiracy involving an unidentified mastermind named as the “Sith Lord” who was out to destroy his company. It was widely mocked as a paranoid fantasy. [See transcript.]

Joe Nocera reported in the New York Times that:

...it was an hourlong monologue during which Mr. Byrne laid out a vast, overarching conspiracy, made up of dozens of Wall Street players -- including the New York attorney general, Eliot Spitzer! -- all under the thumb of a mysterious puppet master, whom Mr. Byrne labeled the Sith Lord. He titled the conspiracy ''The Miscreants' Ball,'' an obvious reference to Michael Milken's old Predators' Ball.

Furthermore, Nocera reported that:

In addition to his conspiracy-mongering, Mr. Byrne talked about Stinger missiles, Wayne and Garth, a mysterious Spanish phone message, stuttering and cocaine. (''I'm not a coke head,'' he said, unprompted.) [Emphasis added.]

Bethany McLean reported in Fortune Magazine that:

Byrne's behavior has been so over the top that it would be tempting to dismiss it as a paranoid fantasy. Can you imagine the CEO of another company making a conference call like Byrne's without being sent packing by his directors? [Emphasis added.]

In December 2005, Byrne had told Bloomberg that “You'll probably read a headline that I was stopped with drugs or a dead body.”

In April 2008, Patrick Byrne appeared on Fox Business Channel and accused CNBC of taking orders from hedge funds through via a secret fax machine:

I think that there’s been an unhealthy collusion developed between certain short sellers and certain journalists. They center around your competitor, CNBC. I happen to know for a fact that there’s a fax machine in the CNBC offices where every morning hedge machines, I mean hedge funds send instructions and journalists sit around and take instructions. [Emphasis added.]

Fox Business Channel reporter Liz Claman responded:

Well I worked in CNBC and I never saw that fax machine. [Emphasis added.]

In his Market Watch column, Herb Greenberg wondered whether:

...it’s time to start feeling sorry for Patrick Byrne, the Overstock CEO whose comments at times, such as today, appear to be detached from any sense of reality. [Emphasis added.]

Minyanville reporter Justin Rohrlich suggested that Byrne had "gone wild" and lost his mind.

“Accident” excuse doesn’t add up

In addition to the questions that Byrne’s conduct raises concerning his mental state, the statement that he gave to Salt Lake Airport policy simply does not make sense. It’s difficult to believe that Patrick Byrne didn’t know there was a loaded gun in his carry-on bag, for the following reasons:

1. The gun is very special to Byrne. Until it was confiscated by airport police, he slept with it every night.

2. The photograph released by the airport police, which has not been previously published, shows that the gun was in the front pocket of his carry-on bag, on top of his iPad. (See below):

Patrick Byrne's carry-on bag

3. According to the Glock website, the gun is 7.28 inches in length, 4.99 inches in height, and 1.18 inches in width. It weighs 31.06 ounces (almost 2 pounds) fully loaded.

4. Byrne has claimed in the past that he has a photographic memory.

According to Fortune Magazine:

He has a nearly photographic memory, which he is fond of demonstrating with what he calls his memory trick: If he studies a deck of cards for a couple of minutes, he can recite them back, one by one, in either direction. He can even recite the same list again six months later. [Emphasis added.]

Patrick Byrne had appeared on Utah Now and showed off his photographic memory. He asked interviewer Doug Fabrizio, "What is your birthday?" Fabrizio replied, "July 18." Within seconds, Byrne correctly told Fabrizio the exact day of the week he was born on: Saturday. Byrne further bragged, "When I was seven, I could memorize cards." [See transcript.]

Overstock is late to disclose this serious incident involving its CEO

Initially, Overstock.com was hoping no one would find out about Byrne’s arrest on January 16. News of Byrne's arrest was only disclosed on Friday in a TSA announcement a day later. When interviewed by the Salt Lake Tribune, Overstock.com President Jonathan Johnson claimed that it was all a mistake because Patrick Byrne took the wrong bag to the airport:

"He has told me he regrets and apologizes for the incident," Johnson said. Byrne is a longtime concealed carry permit holder and is very careful and skilled with guns, but he was in a rush to get to the airport Wednesday night and mistakenly believed the weapon was safely in his home, not in a bag he hadn’t used in a while, Johnson said. [Emphasis added.]

However, Johnson’s story falls apart when reading the arrest report. Byrne, who claims to have a photographic memory, packed a gun that he slept with the night before in the front pocket of his carry-on bag on top of his iPad. How could he forget where his gun was?

Patrick Byrne was carrying $3,178 in cash

According to the police report, Patrick Byrne was carrying $3,178 in cash. What was he planning to do with all that cash? Maybe self-medicate?

Should Patrick Byrne be carrying a gun?

Given Byrne’s past bizarre behavior and paranoid fantasies, why is Patrick Byrne permitted to carry a gun? Byrne’s temper tantrums and paranoia has been well documented in the press. His paranoia is no longer a figure of speech. He is literally sick. People sleep with guns by the side of their bed when they have genuine fears of someone coming to kill them.

There are two possibilities: Either Byrne’s life is in danger or he is mentally ill. I’m putting my money on No. 2.

Written by,

Sam E. Antar

Recommended reading: Overstock Accounting Fraud

Disclosure

I am a convicted felon and a former CPA. As the criminal CFO of Crazy Eddie, I helped my cousin Eddie Antar and other members of his family mastermind one of the largest securities frauds uncovered during the 1980's. I committed my crimes in cold-blood for fun and profit, and simply because I could. If it weren't for the heroic efforts of the FBI, SEC, Postal Inspector's Office, US Attorney's Office, and class action plaintiff's lawyers who investigated, prosecuted, and sued me, I would still be the criminal CFO of Crazy Eddie today.

There is a saying, "It takes one to know one." Today, I work very closely with the FBI, IRS, SEC, Justice Department, and other federal and state law enforcement agencies in training them to identify and catch white-collar criminals. Often, I refer cases to them as an independent whistleblower. I teach white-collar crime classes for various government entities, professional organizations, businesses, and colleges and universities. More recently, I've helped the AICPA Fraud Task Force develop better methods for detecting fraud. I do not want or seek forgiveness for my vicious crimes from my victims. My past sins are unforgivable.

I do not own any Overstock.com securities long or short.

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